It is approaching that time of year when the Office of State Revenue will issue land tax notices for properties in Queensland and when everyone considers the implications of land tax when signing contracts.
Land tax is calculated on the land owned in Queensland at midnight on 30 June each year. This means that if a property owner holds property at midnight on 30 June in a particular year, they will be liable for land tax for the entire financial year – even if they sell the property part way through that year.
The tax rate that applies depends on what type of owner you are (individual, trustee, company), the total taxable value of your land and whether any exemptions apply. Companies and trustees pay a higher rate of land tax than individuals – this can be significant when adjustments for land tax are made when a property is bought or sold.
It is it is important to note that many standard contracts, like the REIQ Residential House & Land contract and the REIQ Residential Lots in a Community Titles Scheme contract exclude adjustments for land tax. This means that special conditions need to be included in these contracts if the Seller has a land tax liability and wants to seek an adjustment from the Buyer at settlement.
In relation to commercial property sales, the standard REIQ contracts do address land tax adjustments but in many instances the Seller does not recover the greatest amount of land tax possible, if any at all. This is because of the terms contained in the standard REIQ contracts which provide that land tax is to be adjusted on the land tax assessment which would issue if:
- the land was the only land the Seller owned in Queensland; and
- the owner was a natural person resident in Queensland.
The difference in the amount of land tax which can be recovered from the addition of a small special condition can be quite dramatic. Unfortunately, it is often the case that after the land tax payment has been made at the beginning of the new financial year the importance of inserting a special condition is forgotten. Including a special condition in a contract to enable a Seller to recover their land tax is a matter which can be handled simply and quickly. Accordingly, if you would like further assistance in this regard or further details on any land tax issues please contact our Directors, Andrew Pye or Stephen Gibson, or any member of our experience property law team.
Associate | Property Law
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